What changed in this filing

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Item 1. Financial Statements

2023-04-26 compared with 2022-10-25 · 89 added, 230 removed, 489 unchanged (39% of the section changed)

4 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Net sales $ 269,096 $ 244,169

6 unchanged sentences

Interest expense, net 3,290 3,609

Pension settlement expense 49,128 — 49,128 —

Aviation Manufacturing Jobs Protection (AMJP) grant — ( 5,832 ) — ( 5,832 )

Other (income)/expense, net ( 455 ) ( 3,928 )

Income before income taxes 37,707 39,073

Income tax expense/(benefit) ( 3,183 ) 12,889 22,273 36,375

Income tax expense 10,621 10,998

Net income 27,086 28,075

12 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Net income $ 27,086 $ 28,075

1 unchanged sentence

Foreign currency translation and other adjustments 13,440 ( 1,551 )

Reclassification of loss on pension settlement 42,657 — 42,657 —

Amortization of pension liability adjustments:

4 unchanged sentences

Income taxes related to items of other comprehensive income/(loss):

Reclassification of loss on pension settlement ( 16,459 ) — ( 16,459 ) —

Amortization of prior service credit 315 344

9 unchanged sentences

(in thousands, except share data)

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Cash and cash equivalents $ 304,258 $ 291,776

30 unchanged sentences

authorized 25,000,000 shares;

none issued and outstanding in 2022 and 104 in 2021

none issued and outstanding in 2023 and 2022

Additional paid in capital 441,917 441,540

16 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

OPERATING ACTIVITIES

Net income $ 27,086 $ 28,075

Adjustments to reconcile net income to net cash provided by operating activities:

Adjustments to reconcile net income to net cash used in operating activities:

Depreciation 15,864 15,597

3 unchanged sentences

Non-cash interest expense 280 282

Non-cash portion of pension settlement expense 42,657 — 42,657 —

Compensation and benefits paid or payable in Class A Common Stock 378 745

14 unchanged sentences

Other, net 2,042 ( 398 )

Net cash provided by operating activities 29,594 52,859 67,307 148,499

Net cash used in operating activities ( 16,393 ) ( 5,391 )

INVESTING ACTIVITIES

10 unchanged sentences

Dividends paid ( 7,778 ) ( 6,742 )

Net cash used in financing activities ( 44,523 ) ( 6,835 ) ( 9,119 ) ( 69,339 )

Net cash provided by financing activities 41,086 26,875

Effect of exchange rate changes on cash and cash equivalents 4,064 ( 351 )

(Decrease)/increase in cash and cash equivalents ( 44,388 ) 32,887 ( 25,554 ) 44,901

Increase in cash and cash equivalents 12,482 5,379

Cash and cash equivalents at beginning of period 291,776 302,036

10 unchanged sentences

The preparation of financial statements in accordance with U.S.

generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in Albany International Corp.’s Consolidated Financial Statements and accompanying Notes.

generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the Company's Consolidated Financial Statements and accompanying Notes.

Actual results could differ materially from those estimates.

10 unchanged sentences

The Albany Engineered Composites (“AEC”) segment provides highly engineered, advanced composite structures to customers in the commercial and defense aerospace industries.

The segment includes Albany Safran Composites, LLC (“ASC”), in which our customer SAFRAN Group (“Safran”) owns a 10 percent noncontrolling interest.

AEC, through ASC, is the exclusive supplier of the LEAP program of advanced composite fan blades and fan cases under a long-term supply contract.

The segment includes Albany Safran Composites, LLC (“ASC”), in which our customer, the SAFRAN Group (“SAFRAN”) owns a 10 percent noncontrolling interest.

AEC, through ASC, is the exclusive supplier of the LEAP program of advanced composite fan blades and fan cases under a long-term supply contract, where revenue is determined by a cost-plus-fee agreement.

The LEAP engine is used on the Airbus A320neo, Boeing 737 MAX, and COMAC 919 aircraft .

AEC's largest aerospace customer is the SAFRAN Group and sales to SAFRAN (consisting primarily of fan blades and cases for CFM's LEAP engine) accounted for approximately 16 percent of the Company's consolidated Net sales in 2022.

AEC net sales to Safran were $ 125.4 million and $ 81.6 million in the first nine months of 2022 and 2021, respectively.

The total of Accounts receivable, Contract assets and Noncurrent receivables due from Safran amounted to $ 76.4 million and $ 79.6 million as of September 30, 2022 and December 31, 2021, respectively.

AEC net sales to SAFRAN were $ 45.3 million and $ 40.4 million in the first three months of 2023 and 2022, respectively.

The total of Accounts receivable, Contract assets and Noncurrent receivables due from SAFRAN amounted to $ 80.2 million and $ 80.8 million as of March 31, 2023 and December 31, 2022, respectively.

Other significant programs by AEC include the Sikorsky CH-53K, F-35, JASSM, and Boeing 787 programs.

3 unchanged sentences

The following tables show data by reportable segment, reconciled to consolidated totals included in the financial statements:

Three months ended September 30, Nine months ended September 30,

Three months ended March 31,

(in thousands)

2022 2021 2022 2021

Machine Clothing

13 unchanged sentences

Interest expense

4,759 4,388 13,799 13,105

Pension settlement expense 49,128 — 49,128 —

AMJP grant — ( 5,832 ) — ( 5,832 )

Other (income)/expense, net ( 455 ) ( 3,928 )

Income before income taxes $ 37,707 $ 39,073

A subsidiary within our Machine Clothing segment has been a partner in a joint venture (“JV”) that supplies paper machine clothing products to local papermakers in Russia.

In March 2022, we made the decision to cease doing business in Russia, including giving notice to our JV partner of our intent to exit the venture.

As a result, we recognized $ 1.6 million expense in the consolidated statement of operations, representing reserves against the risk of uncollectible customer receivables and obsolescence of certain inventory destined for Russian customers.

We also wrote down the net book value of our investment in the aforementioned JV to reflect our intent to exit such venture, resulting in $ 0.8 million impairment loss during the first quarter of 2022.

In the third quarter, we took actions to settle certain pension plan liabilities in the U.S., leading to charges totaling $ 49.1 million, which were included as Corporate expenses and other.

This led to a reduction of unfunded pension liabilities of $ 6.2 million.

Revenue Recognition:

Products and services provided under long-term contracts represent a significant portion of sales in the Albany Engineered Composites segment and we account for these contracts using the percentage of completion (actual cost to estimated cost) method.

Products and services provided under long-term contracts represent a significant portion of sales in the Albany Engineered Composites segment and we account for these contracts over time, primarily using the percentage of completion (actual cost to estimated cost) method.

That method requires significant judgment and estimation, which could be considerably different if the underlying circumstances were to change.

1 unchanged sentence

Changes in the estimated profitability of long-term contracts could be caused by increases or decreases in the contract value, revisions to customer delivery requirements, updated labor or overhead rates, factors affecting the supply chain, changes in the evaluation of contract risks and opportunities, or other factors .

Changes in the estimated profitability of long-term contracts increased operating income by $ 2.6 million for the third quarter of 2022 and $ 2.0 million for the first nine months of 2022.

Ad justments in the estimated profitability of long-term contracts increased operating income by $ 2.1 million and $ 2.4 million for the three and nine month periods ended September 30, 2021, respectively.

Changes in the estimated profitability of long-term contracts decreased operating income by $ 0.7 million during the first three months of 2023, compared to a decrease of $ 0.7 million in the same period last year.

We disaggregate revenue earned from contracts with customers for each of our business segments and product groups based on the timing of revenue recognition, and groupings used for internal review purposes.

The following table disaggregates revenue for each product group by timing of revenue recognition:

Three months ended September 30, 2022

Three months ended March 31, 2023

(in thousands)

8 unchanged sentences

Total revenue $ 158,071 $ 111,025 $ 269,096

Three months ended September 30, 2021

Three months ended March 31, 2022

(in thousands)

9 unchanged sentences

$ 157,076 $ 87,093 $ 244,169

Nine months ended September 30, 2022

(in thousands)

Point in Time Revenue

Recognition Over Time Revenue

Recognition Total

Machine Clothing $ 456,423 $ 2,698 $ 459,121

Albany Engineered Composites

ASC — 122,836 122,836

Other AEC 14,750 169,394 184,144

Total Albany Engineered Composites 14,750 292,230 306,980

Total revenue $ 471,173 $ 294,928 $ 766,101

Nine months ended September 30, 2021

(in thousands) Point in Time Revenue

Recognition Over Time Revenue

Recognition Total

Machine Clothing $ 459,703 $ 2,595 $ 462,298

Albany Engineered Composites

ASC — 80,158 80,158

Other AEC 11,901 134,965 146,866

Total Albany Engineered Composites 11,901 215,123 227,024

Total revenue $ 471,604 $ 217,718 $ 689,322

The following table disaggregates MC segment revenue by significant product groupings (paper machine clothing ("PMC") and engineered fabrics), and, for PMC, the geographical region to which the paper machine clothing was sold:

Three months ended September 30, Nine months ended September 30,

Three months ended March 31,

(in thousands)

2022 2021 2022 2021

Americas PMC $ 83,378 $ 76,616

6 unchanged sentences

Most contracts in the AEC segment are relatively short duration firm-fixed-price orders.

Remaining performance obligations on contracts that had an original duration of greater than one year totaled $ 600 million and $ 155 million as of September 30, 2022 and 2021, respectively, and related primarily to firm contracts in the AEC segment.

Of the remaining performance obligations as of September 30, 2022, we expect to recognize as revenue approximately $ 46 million during 2022, $ 124 million during 2023, $ 107 million during 2024, and the remainder thereafter.

Remaining performance obligations on contracts that had an original duration of greater than one year totaled $ 821 million and $ 263 million as of March 31, 2023 and 2022, respectively, and related primarily to firm contracts in the AEC segment.

Of the remaining performance obligations as of March 31, 2023, we expect to recognize as revenue approximately $ 126 million during 2023, $ 135 million during 2024, $ 129 million during 2025, and the remainder thereafter.

Pensions and Other Postretirement Benefit Plans

2 unchanged sentences

The Company accrues the cost of providing these benefits during the active service period of the employees.

The composition of the net periodic benefit cost for the nine months ended September 30, 2022 and 2021, was as follows:

The composition of the net periodic benefit cost for the three months ended March 31, 2023 and 2022, was as follows:

Pension plans

11 unchanged sentences

Net periodic benefit cost/(credit) $ 504 $ 565 $ ( 333 ) $ ( 317 )

Settlement charge 49,128 — — —

Net benefit cost/(credit) $ 50,816 $ 2,462 $ ( 952 ) $ ( 745 )

The amount of net benefit cost/(credit) is determined at the beginning of each year and generally only varies from quarter to quarter when a significant event occurs, such as a curtailment or a settlement.

In the third quarter, we took actions to settle certain pension plan liabilities for a plan in the U.S., leading to charges totaling $ 49.1 million.

No similar charges were incurred in the prior year.

There were no such events in the first three months of 2023 or 2022.

Service cost for defined benefit pension and postretirement plans are reported in the same line item as other compensation costs arising from services rendered by the pertinent employees during the period.

2 unchanged sentences

The components of Other (Income)/Expense, net are:

Three months ended September 30, Nine months ended September 30,

Three months ended March 31,

(in thousands)

2022 2021 2022 2021

Currency transaction (gains)/losses $ 60 $ ( 3,741 )

Bank fees and amortization of debt issuance costs

76 74 252 284

Components of net periodic pension and postretirement cost other than service cost ( 125 ) ( 136 )

1 unchanged sentence

Total $ ( 455 ) $ ( 3,928 )

Other (income)/expense, net, included foreign currency gains of $ 6.6 million and $ 17.7 million in the three and nine month periods ended September 30, 2022, respectively, as compared to losses of $ 0.5 million and $ 0.8 million in the three and nine month periods ended September 30, 2021, respectively.

The weaker Euro during the three and nine month periods ended September 30, 2022 led to the gains on foreign currency related transactions during such periods.

The following table presents components of income tax expense for the three and nine months ended September 30, 2022 and 2021:

Three months ended September 30, Nine months ended September 30,

Other (income)/expense, net, included foreign currency losses of $ 0.1 million in the first three months of 2023, as compared to gains of $ 3.7 million in the same period last year.

The weaker Euro and Renminbi during the three month period ended March 31, 2023 led to a net loss on foreign currency related transactions, compared to a stronger Euro and Renminbi in the same period last year.

The following table presents components of income tax expense for the three months ended March 31, 2023 and 2022:

Three months ended March 31,

(in thousands, except percentages) 2023 2022

9 unchanged sentences

Provision for/resolution of tax audits and contingencies, net 28 6

US Pension Settlement - Release of Residual Tax Effect ( 5,217 ) — ( 5,217 ) —

Other 322 20 359 88

Impact of long range tax planning ( 443 ) —

Total income tax expense/(benefit) $ 10,621 $ 10,998

(1) Calculated at estimated annual tax rates of 28.9 % and 30.0 % for the three and nine months ended September 30, 2022 and 2021.

(1) Calculated at estimated annual tax rates of 29.3 % and 28.0 %, respectively.

Income tax expense for the quarter was computed in accordance with ASC 740-270, Income Taxes – Interim Reporting.

Under this method, loss jurisdictions, which cannot recognize a tax benefit with regard to their generated losses, are excluded from the annual effective tax rate (AETR) calculation and their taxes will be recorded discretely in each quarter.

The Company's policy for releasing income tax effects from accumulated other comprehensive income is the specific identification approach, whereas these items are released to income tax expense when the individual items are disposed of, terminated or extinguished.

The Tax Cuts and Jobs Act lowered the U.S.

corporate tax rate from 35% to 21% as of December 31, 2017, creating residual tax effects as a result of the remeasurement of deferred tax assets and liabilities originally established in other comprehensive income.

As a result of the U.S.

pension liability settlement (see Note 3), and consistent with the Company's policy, in the third quarter of 2022, the Company recorded a net tax benefit of $ 5.2 million for the release of the residual tax effects within other comprehensive income related to the U.S.

pension settlement.

Under this method, loss jurisdictions, which cannot recognize a tax benefit with regard to their generated losses, are excluded from the annual effective tax rate calculation and their taxes will be recorded discretely in each quarter.

Earnings Per Share

The amounts used in computing earnings per share and the weighted average number of shares of potentially dilutive securities are as follows:

Three months ended September 30, Nine months ended September 30,

Three months ended March 31,

(in thousands, except market price and earnings per share)

2022 2021 2022 2021

Net income attributable to the Company $ 26,889 $ 27,737

6 unchanged sentences

Weighted average number of shares used in calculating diluted net income per share 31,217 31,961

Average market price of common stock used for calculation of dilutive shares $ 86.00 $ 80.33 $ 84.53 $ 82.41

Net income attributable to the Company per share:

2 unchanged sentences

Accumulated Other Comprehensive Income ("AOCI")

The table below presents changes in the components of AOCI for the period December 31, 2021 to September 30, 2022:

The table below presents changes in the components of AOCI for the period December 31, 2022 to March 31, 2023:

(in thousands)

4 unchanged sentences

13,881 ( 441 ) ( 494 ) 12,946

Pension settlement expense, net of tax — 26,198 — 26,198

Interest expense related to swaps reclassified to the Consolidated Statements of Income, net of tax — — ( 2,408 ) ( 2,408 )

2 unchanged sentences

Net current period other comprehensive income 13,881 ( 916 ) ( 2,902 ) 10,063

September 30, 2022 $ ( 185,721 ) $ ( 12,613 ) $ 17,961 $ ( 180,373 )

The table below presents changes in the components of AOCI for the period December 31, 2020 to September 30, 2021:

March 31, 2023 $ ( 132,970 ) $ ( 16,699 ) $ 14,805 $ ( 134,864 )

The table below presents changes in the components of AOCI for the period December 31, 2021 to March 31, 2022:

(in thousands) Translation

6 unchanged sentences

Net current period other comprehensive income ( 1,730 ) 74 10,018 8,362

September 30, 2021 $ ( 100,327 ) $ ( 39,059 ) $ ( 5,525 ) $ ( 144,911 )

The components of our Accumulated Other Comprehensive Income that are reclassified to the Statement of Income relate to our pension and postretirement plans and interest rate swaps.

The table below presents the expense/(income) amounts reclassified from AOCI, and the line items of the Statement of Income that were affected for the three and nine months ended September 30, 2022 and 2021:

Three months ended September 30, Nine months ended September 30,

March 31, 2022 $ ( 107,610 ) $ ( 38,416 ) $ 8,404 $ ( 137,622 )

The components of AOCI that are reclassified to the Consolidated Statements of Income relate to our pension and postretirement plans and interest rate swaps.

The table below presents the expense/(income) amounts reclassified from AOCI, and the line items of the Consolidated Statements of Income that were affected for the three months ended March 31, 2023 and 2022:

Three months ended March 31,

(in thousands)

2022 2021 2022 2021

Pretax Derivative valuation reclassified from Accumulated Other Comprehensive Income:

Expense/(income) related to interest rate swaps included in Income before taxes (a)

$ ( 106 ) $ 1,803 $ 2,758 $ 5,049

Expense/(income) related to interest rate swaps included in Income before taxes $ ( 3,223 ) $ 1,696

Income tax effect 815 ( 430 )

2 unchanged sentences

Pretax pension and postretirement liabilities reclassified from Accumulated Other Comprehensive Income:

Pension settlement expense 42,657 — 42,657 —

Amortization of prior service credit ( 1,031 ) ( 1,123 )

Amortization of net actuarial loss

967 1,103 2,905 3,320

Total pretax amount reclassified (b) 42,501 ( 16 ) 42,194 ( 36 )

Total pretax amount reclassified (a) ( 685 ) ( 152 )

Income tax effect

( 16,411 ) 5 ( 16,317 ) 11

Effect on net income due to items reclassified from Accumulated Other Comprehensive Income $ ( 475 ) $ ( 105 )

(a) Included in Interest expense, net are payments related to the interest rate swap agreements and amortization of swap buyouts (see Notes 13 and 14).

(b) These accumulated other comprehensive income components are included in the computation of net periodic pension cost (see Note 3).

(a) These accumulated other comprehensive income components are included in the computation of net periodic pension cost (see Note 3).

Noncontrolling Interest

2 unchanged sentences

The table below presents a reconciliation of income attributable to the noncontrolling interest and noncontrolling equity in the Company’s subsidiary, Albany Safran Composites, LLC:

Nine months ended September 30,

Three months ended March 31,

(in thousands, except percentages) 2023 2022

12 unchanged sentences

The notes may be presented for payment at maturity, which is less than one year.

As of September 30, 2022 and December 31, 2021, Accounts receivable consisted of the following:

As of March 31, 2023 and December 31, 2022, Accounts receivable consisted of the following:

(in thousands)

September 30,

2023 December 31,

7 unchanged sentences

The Noncurrent receivables will be invoiced to the customer over a 10-year period, which began in 2020.

As of September 30, 2022 and December 31, 2021, Noncurrent receivables consisted of the following:

As of March 31, 2023 and December 31, 2022, Noncurrent receivables consisted of the following:

(in thousands)

September 30,

2023 December 31,

9 unchanged sentences

Contract assets and Contract liabilities are reported on the Consolidated Balance Sheets in a net position on a contract-by-contract basis at the end of each reporting period.

As of September 30, 2022 and December 31, 2021, Contract assets and Contract liabilities consisted of the following:

As of March 31, 2023 and December 31, 2022, Contract assets and Contract liabilities consisted of the following:

(in thousands)

September 30,

2023 December 31,

4 unchanged sentences

Contract liabilities $ 12,310 $ 15,176

Contract assets increased $ 36.2 million during the nine-month period ended September 30, 2022.

Contract assets increased $ 5.1 million during the three-month period ended March 31, 2023.

The increase was primarily due to an increase in unbilled revenue related to the satisfaction of performance obligations, in excess of the amounts billed to customers for contracts that were in a contract asset position.

There were no impairment losses related to our Contract assets during the nine month periods ended September 30, 2022 and September 30, 2021.

Contract liabilities decreased $ 1.3 million during the nine-month period ended September 30, 2022, primarily due to revenue recognized from satisfied performance obligations exceeding amounts invoiced to customers that were in a contract liability position.

Revenue recognized for the nine-month periods ended September 30, 2022 and 2021 that was included in the Contract liability balance at the beginning of the year was $ 5.0 million and $ 5.3 million, respectively.

There were no impairment losses related to our Contract assets during the three month periods ended March 31, 2023 and March 31, 2022.

Contract liabilities decreased $ 2.9 million during the three-month period ended March 31, 2023, primarily due to revenue recognized from satisfied performance obligations exceeding amounts invoiced to customers that were in a contract liability position.

Revenue recognized for the three-month periods ended March 31, 2023 and 2022 that was included in the Contract liability balance at the beginning of the year was $ 6.7 million and $ 4.8 million, respectively.

Costs included in inventories are raw materials, labor, supplies and allocable depreciation and overhead.

4 unchanged sentences

Once established, the original cost of the inventory less the related write-down represents the new cost basis of such inventories.

As of September 30, 2022 and December 31, 2021, Inventories consisted of the following:

As of March 31, 2023 and December 31, 2022, Inventories consisted of the following:

(in thousands)

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Raw materials $ 81,611 $ 74,631

18 unchanged sentences

Long-term debt, principally to banks and noteholders, consists of:

(in thousands, except interest rates)

September 30, 2022 December 31, 2021

(in thousands, except interest rates) March 31, 2023 December 31, 2022

Revolving credit agreement with borrowings outstanding at an end of period interest rate of 3.58 % in 2023 and 3.16 % in 2022 (including the effect of interest rate hedging transactions, as described below), due in 2024

$ 491,000 $ 439,000

We had no current maturities of Long-term debt as of September 30, 2022 or December 31, 2021.

On October 27, 2020, we entered into a $ 700 million unsecured Four-Year Revolving Credit Facility Agreement (the “Credit Agreement”) which amended and restated the prior amended and restated $ 685 million Five-Year Revolving Credit Facility Agreement, which we had entered into on November 7, 2017 (the “Prior Agreement”).

Under the Credit Agreement, $ 447 million of borrowings were outstanding as of September 30, 2022.

The applicable interest rate for borrowings was LIBOR plus a spread, based on our leverage ratio at the time of borrowing.

At the time of the last borrowing on September 26, 2022, the spread was 1.625 %.

We had no current maturities of Long-term debt as of March 31, 2023 or December 31, 2022.

On October 27, 2020, we entered into a $ 700 million unsecured Four-Year Revolving Credit Facility Agreement (the “Credit Agreement”) which amended and restated the prior amended and restated $ 685 million Five-Year Revolving Credit Facility Agreement, entered into on November 7, 2017 (the “Prior Agreement”).

Under the Credit Agreement, $ 491 million of borrowings were outstanding as of March 31, 2023.

The applicable interest rate for borrowings was LIBOR plus a spread, based on our leverage ratio (as defined in the Credit Agreement) at the time of borrowing.

At the time of the last borrowing on March 30, 2022, the spread was 1.625 %.

The spread was based on a pricing grid, which ranged from 1.500 % to 2.000 %, based on our leverage ratio.

Based on our maximum leverage ratio and our Consolidated EBITDA, and without modification to any other credit agreements, as of September 30, 2022, we would have been able to borrow an additional $ 253 million under the Agreement.

Based on our maximum leverage ratio and our Consolidated EBITDA (as defined in the Credit Agreement), and without modification to any other credit agreements, as of March 31, 2023, we would have been able to borrow an additional $ 209 million under the Agreement.

The Credit Agreement contains customary terms, as well as affirmative covenants, negative covenants and events of default that are comparable to those in the Prior Agreement.

4 unchanged sentences

Under the terms of these transactions, we pay the fixed rate of 0.838 % and the counterparties pay a floating rate based on the one-month LIBOR rate at each monthly calculation date.

The monthly calculation date is the 16th day of each month, and on September 16, 2022, one-month LIBOR was 2.94 %.

On November 28, 2017, we entered into interest rate swap agreements for the period December 18, 2017 through October 17, 2022.

These transactions have the effect of fixing the LIBOR portion of the effective interest rate (before addition of the spread) on $ 350 million of indebtedness drawn under the Credit Agreement at the rate of 2.11 % during the period.

Under the terms of these transactions, we pay the fixed rate of 2.11 % and the counterparties pay a floating rate based on the one-month LIBOR rate at each monthly calculation date.

The monthly calculation date is the 16th day of each month, and on September 16, 2022, one-month LIBOR was 2.94 %.

On September 16, 2022, the all-in-rate on the $ 350 million of debt was 3.735 %.

The monthly calculation date is the 16th of each month, and on March 16, 2023, one-month LIBOR was 4.73 %.

On March 16, 2023, the all-in-rate on the $ 350 million of debt was 2.463 %.

On October 17, 2022, our interest rate swap agreements that were in effect from December 18, 2017 terminated.

These transactions had the effect of fixing the LIBOR portion of the effective interest rate (before addition of the spread) on $ 350 million of indebtedness drawn under the Credit Agreement at the rate of 2.11 % during the period.

Under the terms of those transactions, we paid the fixed rate of 2.11 % and the counterparties paid a floating rate based on the one-month LIBOR rate at each monthly calculation date.

The all-in-rate on the $ 350 million of debt was 3.735 %.

These interest rate swaps are accounted for as a hedge of future cash flows, as further described in Note 14.

No cash collateral was received or pledged in relation to the swap agreements.

Under the Credit Agreement, we are currently required to maintain a leverage ratio (as defined in the agreement) of not greater than 3.50 to 1.00 and minimum interest coverage (as defined) of 3.00 to 1.00.

As of September 30, 2022, our leverage ratio was 1.22 to 1.00 and our interest coverage ratio was 15.79 to 1.00.

Under the Credit Agreement, we are required to maintain leverage and minimum interest coverage ratios (as defined in the Credit Agreement) of not greater than 3.50 to 1.00 and greater than 3.00 to 1.00, respectively.

As of March 31, 2023, our leverage ratio was 1.47 to 1.00 and our interest coverage ratio was 14.76 to 1.00.

We may purchase our Common Stock or pay dividends to the extent our leverage ratio remains at or below 3.50 to 1.00, and may make acquisitions with cash, provided our leverage ratio does not exceed the limits noted above.

Indebtedness under the Credit Agreement is ranked equally in right of payment to all unsecured senior debt.

We were in compliance with all debt covenants as of September 30, 2022.

We were in compliance with all debt covenants as of March 31, 2023.

Currently, our Credit Agreement and certain of our derivative instruments reference one-month USD LIBOR-based rates, which are set to discontinue after June 30, 2023.

Regulators in the U.S.

and other jurisdictions have been working to replace these rates with alternative reference interest rates that are supported by transactions in liquid and observable markets, such as the Secured Overnight Financing Rate (SOFR) for USD LIBOR.

Our Credit Agreement contains provisions specifying alternative interest rate calculations to be employed when LIBOR ceases to be available as a benchmark and we have adhered to the ISDA IBOR Fallbacks Protocol, which will govern our derivatives upon the final cessation of USD LIBOR.

ASU 2020-04, Reference Rate Reform, helps limit the accounting impact from contract modifications, including hedging relationships, due to the transition from LIBOR to alternative reference rates that are completed by December 31, 2022.

We adopted certain provisions of ASU 2020-04 during 2021.

Amendments to the Reference Rate Reform standard have helped limit the accounting impact from contract modifications, including hedging relationships, due to the transition from LIBOR to alternative reference rates that are completed by December 31, 2024.

We adopted certain provisions of this standard during 2021.

While we currently do not expect a significant impact to our operating results, financial position or cash flows from the transition from LIBOR to alternative reference interest rates, we will continue to monitor the impact of this transition until it is completed.

3 unchanged sentences

Level 3 inputs are unobservable data points for the asset or liability, and include situations in which there is little, if any, market activity for the asset or liability.

We had no Level 3 financial assets or liabilities at September 30, 2022, or at December 31, 2021.

We had no Level 3 financial assets or liabilities at March 31, 2023, or at December 31, 2022.

The following table presents the fair-value hierarchy for our Level 1 and Level 2 financial and non-financial assets and liabilities, which are measured at fair value on a recurring basis:

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

(in thousands)

3 unchanged sentences

Interest rate swaps 19,784 — 23,605

Interest rate swaps — — — ( 5,176 )

(a) Original cost basis $ 0.5 million.

4 unchanged sentences

Amounts determined to be due within one year are reclassified to Other current assets and/or Accrued liabilities in the Consolidated Balance Sheets.

Unrealized gains and losses on the swaps flow through the caption Derivative valuation adjustment in the Shareholders’ equity section of the Consolidated Balance Sheets.

As of September 30, 2022, these interest rate swaps were determined to be highly effective hedges of interest rate cash flow risk.

Amounts accumulated in Other comprehensive income are reclassified as Interest expense, net when the related interest payments (that is, the hedged forecasted transactions), and amortization related to the swap buyouts, affect earnings.

Interest (income)/expense related to payments under the active swap agreements totaled $ 2.8 million for the nine month period ended

September 30, 2022, and $ 5.3 million for the nine month period ended September 30, 2021.

Additionally, non-cash interest income related to the amortization of swap buyouts totaled $ 0.0 million for the nine month period ended September 30, 2022 and $ 0.3 million for the nine month period ended September 30, 2021.

Unrealized gains and losses on the interest rate swaps flow through the caption Derivative valuation adjustment in the Shareholders’ equity section of the Consolidated Balance Sheets.

As of March 31, 2023, these interest rate swaps were determined to be highly effective hedges of interest rate cash flow risk.

Amounts accumulated in Other comprehensive income are reclassified as Interest expense, net when the related interest payments (that is, the hedged forecasted transactions), affect earnings.

Interest (income)/expense related to payments under the active swap agreements totaled $( 3.2 ) million for the three month period ended March 31, 2023, and $ 1.7 million for the three month period ended March 31, 2022.

We operate our business in many regions of the world, and currency rate movements can have a significant effect on operating results.

6 unchanged sentences

(Gains)/losses related to changes in fair value of derivative instruments that were recognized in Other (income)/expense, net in the Consolidated Statements of Income were as follows:

Three months ended September 30, Nine months ended September 30,

Three months ended March 31,

(in thousands) 2023 2022

5 unchanged sentences

is a defendant in suits brought in various courts in the United States by plaintiffs who allege that they have suffered personal injury as a result of exposure to asbestos-containing paper machine clothing synthetic dryer fabrics marketed during the period from 1967 to 1976 and used in certain paper mills.

We were defending 3,603 claims as of September 30, 2022.

We were defending 3,597 claims as of March 31, 2023.

The following table sets forth the number of claims filed, the number of claims settled, dismissed or otherwise resolved, and the aggregate settlement amount during the periods presented:

3 unchanged sentences

2022 3,609 43 32 3,598 125

2022 (As of September 30) 3,609 27 21 3,603 $ 5

2023 (As of March 31) 3,598 4 3 3,597 $ —

We anticipate that additional claims will be filed against the Company and related companies in the future but are unable to predict the number and timing of such future claims.

2 unchanged sentences

Our insurance carrier has defended each case and funded settlements under a standard reservation of rights.

As of September 30, 2022, we had resolved, by means of settlement or dismissal, 38,007 claims.

As of March 31, 2023, we had resolved, by means of settlement or dismissal, 38,028 claims.

The total cost of resolving all claims was $ 10.6 million.

Of this amount,

almost 100 % was paid by our insurance carrier, who has confirmed that we have approximately $ 140 million of remaining coverage under primary and excess policies that should be available with respect to current and future asbestos claims.

Of this amount, almost 100 % was paid by our insurance carrier, who has confirmed that we have approximately $ 140 million of remaining coverage under primary and excess policies that should be available with respect to current and future asbestos claims.

The Company’s subsidiary, Brandon Drying Fabrics, Inc.

(“Brandon”), is also a separate defendant in many of the asbestos cases in which Albany is named as a defendant, despite never having manufactured any fabrics containing asbestos.

While Brandon was defending against 7,709 claims as of September 30, 2022, only twelve claims have been filed against Brandon since January 1, 2012, and only $ 15,000 in settlement costs have been incurred since 2001.

While Brandon was defending against 7,709 claims as of March 31, 2023, only twelve claims have been filed against Brandon since January 1, 2012, and only $ 15,000 in settlement costs have been incurred since 2001.

Brandon was acquired by the Company in 1999 and has its own insurance policies covering periods prior to 1999.

3 unchanged sentences

Certain plaintiffs allege injury caused by asbestos-containing products alleged to have been sold by Mount Vernon many years prior to this acquisition.

Mount Vernon is contractually obligated to indemnify the Company against any liability arising out of such products.

Mount Vernon is contractually obligated to indemnify the Company against any liability

arising out of such products.

We deny any liability for products sold by Mount Vernon prior to the acquisition of the Mount Vernon assets.

4 unchanged sentences

Changes in Shareholders’ Equity

The following table summarizes changes in Shareholders’ Equity for the period December 31, 2021 to September 30, 2022:

The following table summarizes changes in Shareholders’ Equity for the period December 31, 2022 to March 31, 2023:

Additional paid-in capital

7 unchanged sentences

Compensation and benefits paid or payable in shares 58 — — — 378 — — — — — 378

Options exercised — — — — 7 — — — — — 7

Shares issued to Directors' — — — — — — — — — — —

Purchase of Treasury shares (a) — — — — — — — 515 ( 43,937 ) — ( 43,937 )

Dividends declared

7 unchanged sentences

March 31, 2023 40,842 $ 41 — $ — $ 441,917 $ 950,415 $ ( 134,864 ) 9,675 $ ( 364,923 ) $ 4,929 $ 897,515

Net income — — — — — 39,201 — — — 168 39,369

Compensation and benefits paid or payable in shares 4 — — — 902 — — — — — 902

Options exercised — — — — — — — — — — —

Shares issued to Directors' — — — — 800 — — ( 13 ) 285 — 1,085

Purchase of Treasury shares (a) — — — — — — — 508 ( 41,128 ) — ( 41,128 )

Dividends declared

Class A Common Stock, $ 0.21 per share

— — — — — ( 6,529 ) — — — — ( 6,529 )

Class B Common Stock, $ 0.21 per share

— — — — — — — — — — —

Cumulative translation adjustments — — — — — — ( 39,661 ) — — ( 91 ) ( 39,752 )

Pension and postretirement liability adjustments — — — — — — 234 — — — 234

Derivative valuation adjustment — — — — — — 3,349 — — — 3,349

June 30, 2022 40,785 $ 41 — $ — $ 439,450 $ 916,805 $ ( 173,700 ) 9,675 $ ( 364,923 ) $ 4,109 $ 821,782

Net income — — — — — 10,694 — — — 129 10,823

Compensation and benefits paid or payable in shares — — — — 835 — — — — — 835

Options exercised — — — — 10 — — — — — 10

Shares issued to Directors' — — — — — — — — — — —

Purchase of Treasury shares (a) — — — — — — — — — — —

Dividends declared

Class A Common Stock, $ 0.21 per share

— — — — — ( 6,533 ) — — — — ( 6,533 )

Class B Common Stock, $ 0.21 per share

— — — — — — — — — — —

Cumulative translation adjustments — — — — — — ( 38,450 ) — — ( 56 ) ( 38,506 )

Pension and postretirement liability adjustments — — — — — — ( 629 ) — — — ( 629 )

Settlement of certain pension liabilities — — — — — — 26,198 — — — 26,198

Derivative valuation adjustment — — — — — — 6,208 — — — 6,208

September 30, 2022 40,785 $ 41 — $ — $ 440,295 $ 920,966 $ ( 180,373 ) 9,675 $ ( 364,923 ) $ 4,182 $ 820,188

The following table summarizes changes in Shareholders’ Equity for the period December 31, 2020 to September 30, 2021:

The following table summarizes changes in Shareholders’ Equity for the period December 31, 2021 to March 31, 2022:

Additional paid-in capital

8 unchanged sentences

Options exercised — — — — 7 — — — — — 7

Purchase of Treasury shares (a) — — — — — — — 515 ( 43,937 ) — ( 43,937 )

Dividends declared

7 unchanged sentences

March 31, 2022 40,781 41 — — 437,748 884,133 ( 137,622 ) 9,180 ( 324,080 ) 4,032 864,252

Net income — — — — — 31,397 — — — 43 31,440

Compensation and benefits paid or payable in shares — — — — 692 — — — — — 692

Options exercised 1 — — — 21 — — — — — 21

Shares issued to Directors' — — — — 706 — — ( 11 ) 241 — 947

Dividends declared

Class A Common Stock, $ 0.20 per share

— — — — — ( 6,150 ) — — — — ( 6,150 )

Class B Common Stock, $ 0.20 per share

— — — — — ( 323 ) — — — — ( 323 )

Cumulative translation adjustments — — — — — — 13,774 — — 183 13,957

Pension and postretirement liability adjustments — — — — — — ( 130 ) — — — ( 130 )

Derivative valuation adjustment — — — — — — 1,394 — — — 1,394

June 30, 2021 39,142 $ 39 1,618 $ 2 $ 435,230 $ 816,778 $ ( 132,064 ) 8,380 $ ( 255,768 ) $ 3,842 $ 868,059

Net income — — — — — 30,862 — — — 80 30,942

Compensation and benefits paid or payable in shares — — — — 845 — — — — — 845

Options exercised 1 — — — 4 — — — — — 4

Shares issued to Directors' — — — — — — — — — — —

Dividends declared

Class A Common Stock, $ 0.20 per share

— — — — — ( 6,478 ) — — — — ( 6,478 )

Class B Common Stock, $ 0.20 per share

— — — — — — — — — — —

Conversion of Class B shares to Class A shares (b) 1,617 2 ( 1,617 ) ( 2 ) — — — — — — —

Cumulative translation adjustments — — — — — — ( 14,943 ) — — ( 192 ) ( 15,135 )

Pension and postretirement liability adjustments — — — — — — 223 — — — 223

Derivative valuation adjustment — — — — — — 1,873 — — — 1,873

September 30, 2021 40,760 $ 41 1 $ 0 $ 436,079 $ 841,162 $ ( 144,911 ) 8,380 $ ( 255,768 ) $ 3,730 $ 880,333

(a) In October 2021, the Company's Board of Directors authorized the Company to repurchase shares of up to $ 200 million through open market purchases, privately negotiated transactions or otherwise, and to determine the prices, times and amounts.

In 2021, the Company repurchased 285,286 shares totaling $ 24.4 million.

During the nine month period ending September 30, 2022, the Company repurchased 1,022,717 shares totaling $ 85.1 million.

(b) In the third quarter of 2021, Standish Family Holdings, LLC and J.S.

Standish Company (the "Selling Stockholders") agreed to sell to J.P.

Morgan Securities LLC 1,566,644 shares of the Company’s Class A Common Stock, par value $ 0.001 per share, to be issued upon conversion of an equal number of shares of the Company’s Class B common stock, par value $ 0.001 per share, at a price per share of $ 75.9656 (the "Transaction").

Immediately following the Transaction, the Selling Stockholders and related persons (including Christine L.

Standish and John C.

Standish) hold in the aggregate shares of the Company’s common stock

entitling them to cast less than one percent of the combined votes entitled to be cast by all stockholders of the Company.

Costs associated with the Transaction were borne directly by the Selling Stockholders.

During the three months ended March 31, 2022, the Company repurchased 514,686 shares totaling $ 43.9 million.

The Company did not repurchase shares during the three months ended March 31, 2023.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements